Title
Racelis vs. Spouses Javier
Case
G.R. No. 189609
Decision Date
Jan 29, 2018
A dispute arose over a leased property when tenants failed to purchase it, withheld rent, and claimed a P78,000 payment was advanced rent. The Supreme Court ruled the payment was earnest money, not rent, and tenants were not entitled to suspend rent due to utility disconnection.

Case Summary (G.R. No. 189609)

Nature of the ₱78,000 Initial Payment

The ₱78,000 was delivered as “initial payment or goodwill money” in connection with a contract to sell, not as advanced rent. Under Article 1482, earnest money is presumptively part of the purchase price and proof of a perfected sale, though this presumption is disputable. Here:

  1. Respondents continued paying monthly rent until February 2004 despite tendering ₱78,000.
  2. The receipts describe the sum as “initial payment or goodwill money,” not rent.
  3. The contract was a contract to sell—title remained with the seller pending full payment; non-payment cancelled the contract by operation of suspensive condition.
    Absent evidence of a contrary agreement, earnest money in a failed sale is forfeited as compensation for the seller’s opportunity cost. Racelis’s offer to return the sum upon sale to another buyer was not an unconditional waiver. Respondents never proved the ₱78,000 was intended as advanced rent.

Supreme Court’s Disposition

  1. Respondents could not validly suspend rent under Article 1658 because the lease had expired and they unlawfully retained possession.
  2. The ₱78,000 constituted earnest money under Article 1482, forfeited upon contract cancellati
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